Starting a new business at any time can be a challenging and intense experience, but it is even harder when the economy is depressed as it is at the moment. In the current economic climate loans or investment for start-ups is in short supply and great demand, and a great many new small businesses are finding that they cannot get any finance at all. Whilst this has led to a number of delays for some start-ups, for others it has meant that they were not able to get their company started and that they failed.
However, there is good news if you are willing to put in the effort. There are still a number of options out there for alternative sources of funding and if you follow the right steps, you will be able to get that funding. All you need to do is work out how much you are going to need for everything, including premises, stock, equipment, wages and other associated costs and then approach one of the following options:
Try at the bank with their small business advisor: Despite the lack of available funds the first place you should go is still your bank. They will know your financial situation and you will have a relationship with them – and they will know if you are good for the credit too. Talk it over with their advisor who will be able to tell you if they think your plan is viable and your business likely to succeed.
Think about using some equity from your home: If you own your own home and you have equity available then it is possible you could release some of this equity as some kind of secured loan, which would then be used for your new business.
Borrowing from friends or family: If you’re ok with doing this and so are they, then friends and family can be a valuable and helpful way to get your business off the ground. Just ensure that you get everything down on paper from the start and that you make it clear that things could go wrong – the last thing you want to do is fall out with your family over money!
Peer-to-Peer-Lending: Along with purchase order financing, peer to peer lending is another recent innovation for small businesses. An online broker will put your business and your business idea together with a network of investors and individuals who want to make small micro loans as a business investment.
Government Loans: In the current financial climate, the government is as keen as possible to get businesses up and running. Consequently there is a lot of small business start-up finance available if you know where to look. What’s more they offer low interest loans and are reliable and keen to help. The only downside is the amount of hoops and bureaucracy you will have to jump through.
Esther is a financial journalist and blogger. She writes about all areas of personal finance from mortgages to credit cards to umbrella companies.